Correlation Between ServiceNow and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both ServiceNow and Lincoln Electric at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ServiceNow and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Lincoln Electric Holdings, you can compare the effects of market volatilities on ServiceNow and Lincoln Electric and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ServiceNow with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Lincoln Electric.
Diversification Opportunities for ServiceNow and Lincoln Electric
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ServiceNow and Lincoln is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and ServiceNow is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ServiceNow are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of ServiceNow i.e., ServiceNow and Lincoln Electric go up and down completely randomly.
Pair Corralation between ServiceNow and Lincoln Electric
Considering the 90-day investment horizon ServiceNow is expected to generate 1.18 times more return on investment than Lincoln Electric. However, ServiceNow is 1.18 times more volatile than Lincoln Electric Holdings. It trades about 0.1 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.04 per unit of risk. If you would invest 59,716 in ServiceNow on August 29, 2024 and sell it today you would earn a total of 44,424 from holding ServiceNow or generate 74.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. Lincoln Electric Holdings
Performance |
| Timeline |
| ServiceNow |
| Lincoln Electric Holdings |
ServiceNow and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and Lincoln Electric
The main advantage of trading using opposite ServiceNow and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Lincoln Electric can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.| ServiceNow vs. Autodesk | ServiceNow vs. Intuit Inc | ServiceNow vs. Zoom Video Communications | ServiceNow vs. Snowflake |
| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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